Blended Finance: How It Can Transform the MSME Landscape in Bangladesh

Access to finance is a major impediment to MSME growth in Bangladesh. Despite the presence of approximately 60 banks, 34 NBFIs, 760 MFIs, and 17 alternative investment firms in Bangladesh, MSMEs frequently struggle to attract capital that is in line with their needs and characteristics. As a consequence, they quite often fail to develop to their full potential. Given the current state of the ecosystem, early-stage businesses such as MSMEs require patient or risk capital. Such options, however, are scarce at the moment.

At LightCastle Partners, we believe Blended Finance can play a pivotal role in addressing the key gap in the market. Simply put, Blended Finance is a combination of government/non-profit grants, equity instruments, and debt instruments infused in a business. Effective implementation of this financing model can open the door to the sustainable development of the entrepreneurial ecosystem in Bangladesh and beyond.

Blended finance allows organizations with different objectives to invest alongside one another while achieving their own goals (whether financial return, social impact, or a blend of both). 

By utilizing market-correcting strategies and cutting-edge financial tools to persuade capital providers to take on greater risks and achieve sustainable development through private investment, Blended Finance is poised to be the future of global development.

Through our work in Blended Finance, LightCastle Partners has been striving to strengthen the MSME ecosystem in Bangladesh. Through our projects, we have mobilized over BDT 5.68 million in investments for 45+ enterprises across 17+ sectors. 

With the support of our development and financial partners, we have worked to foster sustainable growth for businesses through long-term financial and social impact.

Our work has been anchored around creating sustainable growth for enterprises through lasting financial and social impact. We have sought to offer unique equity and impact-linked instruments and effectively implemented 6+ investment models in our investment deals so far in an effort to address the lack of access to finance issue faced by so many MSMEs. Our efforts have helped businesses achieve sustainable growth and produced eight or more instances of further capital raising.

Read our latest publication to discover more about our work in Blended Finance and how it can be the key to transforming the MSME ecosystem in Bangladesh.